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Does anyone have any experience with the FTP built into Dreamweaver? It refuses to connect to my webhost and I'm fairly certain I have the login information set up correctly.

Yes, to be frank it's junk. They still don't support TLS encrypted FTP sessions for example. We always recommend to our customers that they use a separate FTP program rather than use the built in DW one.

Hi hoping someone could help me out. Just getting into the whole rookie web design world, if someone sold me a website and transferred it to my hosting account can I work on the files directly through the hosting panel or do I have to copy the files to my computer, work on them, and then upload them to the server?

Almost all reliable hosts support online editor. Using this feature you can easily work on ur files. But there's problems like code placement, checking, image/file uploading that kill a lot of time. If u test it on ur own Pc then its the best. You can use dreamweaver/ Frontpage to do so.